Advice, information, and resources for 1040 tax professionals from 40+ year veteran Robert D Flach

Wednesday, January 30, 2013

THE INSTITUTE FOR JUSTICE RESPONDS TO THE DEPARTMENT OF JUSTICE

As you know, on January 18, 2013, in a move that
surprised the tax preparation community and, I expect, the Internal Revenue
Service as well, the U.S. District Court for the District of Columbia shut down
the IRS tax return preparer regulation program.

In his decision in Sabina Loving, et. al. v.
Internal Revenue Service, Judge James E. Boasberg said the Internal Revenue
Service had overstepped its authority by regulating tax return preparers.
Congress never gave the IRS the authority to license tax preparers. The judge's
order included an injunction that bars the IRS from continuing its
implementation of the RTRP program.

The Justice Department subsequently filed a motion
on behalf of the IRS requesting that the court suspend the injunction and allow
the Service to continue its RTRP program, pending resolution of an appeal to be
filed within 30 days.

In the latest development in this story, yesterday
the Institute for Justice filed a response in federal court to the Justice
Department’s request for a stay of the injunction.

In briefly reviewing the Institute for Justice
filing I discovered that a blog post by me here at TTP, which talked about the
impossibility of the 300,000+ still untested potential RTPS to be able to take
and pass the test by the December 31, 2013 deadline, was referenced in the latest
filing by the Institute for Justice, in a footnote (#11 on Page 10).Posts by Joe Kristan of THE ROTH AND COMPANY
TAX UPDATE BLOG, Jason Dinesen of DINESEN TAX TIMES, and Kelly Phillips Erb of
FORBES’ “TaxGirl” are also referenced in the footnotes.

In discussing the Department of Justice motion,
fellow “twit” (we follow each other on Twitter) Dan Alban, attorney for the
Institute for Justice, explains that –

“The IRS has
repeatedly and grossly misrepresented how the court’s ruling in this case will
affect this tax season, tax payers and the IRS itself.”

To quote the introduction to the January 29 filing -

“The sky is
not falling. Despite the dire claims of Defendants (hereinafter “the IRS”), the
world of tax administration will not come to an end if this Court’s injunction
against the IRS’s unlawful licensing scheme for tax preparers remains in place
while on appeal. In fact, the absence of the registered tax return preparer
(“RTRP”) licensing regulations will make this income tax season no different
from every prior tax season. For the 100-year history of the modern income tax,
tax preparers have always been free to assist taxpayers in preparing returns without
obtaining a license from the IRS or any other federal agency, and taxpayers
have always been free to hire whomever they pleased to prepare their tax return.”

The IFJ contends the the Department of Justice
motion made “several misleading claims
and unsettling arguments, including inflating the monetary cost of the ruling
to the agency by over 2,000 percent”.

Dan points out -

“But even
taken at face value, the IRS’s arguments are truly appalling. The IRS told the court that their licensing
scheme is a cash cow, and the agency must be permitted to continue milking
hapless tax preparers, despite a federal court declaring their scheme unlawful.”

I originally supported the IRS regulation regime,
mostly as a “lesser of two evils” alternative to having regulation legislated
by Congress.I supported the concept of
the RTRP designation, and felt that this certification would provide experienced,
competent, and ethical “previously unenrolled” preparers like myself with the
respect and recognition we deserved.But
all along I believed the best option would be certification and oversight by an
independent industry-based organization (I discuss this option in detail in an
editorial that will appear in TAXPRO TODAY either tomorrow or Friday).

While I respected the original lawsuit’s “libertarian”
arguments, I did not agree that the IRS regulation regime would force tons of serious
and legitimate tax professionals out of business.I do agree that the regulation would result
in the loss of many probably good intentioned and ethical part-time seasonal “casual
preparers” (as Joe Kristan has called them) with minimal training and
competence – but I also feel that this is not necessarily a bad thing.

At this point I do support the court’s
decision.I feel that the injunction should
stand and the IRS RTRP program should remain shut down for good.The court should not grant the
Department of Justice motion.There
would be no real “damage” to the IRS if the injunction stands, while, as I mentioned
in an earlier post here, there would be much potential “damage” to tax preparers
if the regime were to temporarily continue and the court decision is eventually
upheld, as I expect it will be.

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About Me

I am a professional tax consultant with 40+ years experience preparing individual income tax returns for people in all walks of life, from professional football players and actors to doctors and architects to secretaries and clerks.
I am a member of the National Association of Tax Professionals.
I was born and raised in Jersey City, New Jersey, but recently moved to Northeast Pennsylvania.
After the "tax season" is over I enjoy travel via all methods (bus, train, ship and plane), going to the theatre (local, regional, off-Broadway and Broadway), and "blogging".